Living Trust and Estate Planning FAQs

Senior couple with financial adviser.
What’s the difference between a Living Trust and a Will?

A Living Trust is a legal document created by you, during your lifetime. Like a Will, a Living Trust spells outexactly what your wishes are about your assets, your family, and your heirs. The major difference is that a Will only works after you die (and must be entered into probate), and a Trust bypasses the costly and time-consuming probate process. With a Trust, your successor trustee (who fulfill the same role as an executor of a Will) carries out your instructions as listed in your trust not only at your death, but also if you are sick and not able to handle your own affairs due to incapacity.

I’m not rich, do I really need a Will or a Living Trust?
Almost everyone needs a Will or Living Trust to handle their affairs when they are not able to speak for themselves. You can appoint someone to be in charge of your estate, to direct how your assets are to be distributed, and handle many other more complicated issues. If you have minor children, you should have a Will to nominate Guardians, even if you have a Living Trust. A Trust is also a great way to make sure your affairs can be attended to if you are sick.

Who needs a living trust?
In California, if you own real property you probably need a Living Trust. If you have minor children, you probably need a Living Trust. A Living Trust is critical for people who have complex financial or personal circumstances, such as substantial assets, a blended family, closely held business interests, or property in other states.

Why do I need a Living Trust?

  • No court! Your properly funded Living Trust will avoid the need for a Conservatorship if you get sick, and eliminates the probate process when you die. This saves significant time and money for you, and for your heirs.
  • A Living Trust is the best way to make special provisions for your heirs. Do you want to keep your children or grandchildren from wasting their inheritance? Protect assets for special needs heirs so they can still get their benefits and more, or even create a trust for your pets? A Living Trust is the answer.
  • A Trust can protect your heirs’ inheritances from their creditors, spouses, and more.
  • For some families a Trust can offer tax protection, not just from estate taxes, but capitals gains and gift taxes as well.
  • A Living Trust gives you and your family control and privacy.
  • A Living Trust works for any size estate.

What happens if I die without a Will or Trust?
If you die without a Will or Living Trust (intestate), California law determines who receives your property by default. Think of it as State’s best guess as to how you would want to distribute your estate, and who you would want to be in charge. Of course, this plan may or may not reflect your actual wishes. Also, many of the procedures required in probate are not necessary for many estates but must still be followed. A Will or Living Trust allows you to alter the state’s default plan to suit your family you’re your wishes. It also permits you to exercise control over a variety of personal decisions that the simple “Statutory Will” can’t address. If you die without a Will or Trust, your estate will most often be subject to the probate process, which enforces the State’s default provisions.

What is Probate exactly?
Probate is a court procedure to administer and distribute an estate after death. If you have assets that are not in a Living Trust, or have proper beneficiary designations, these assets will likely be subject to probate court administration after your death. This can be a very expensive and time consuming procedure, especially when you compare probate costs to the must smaller cost of a good estate plan.

Is Probate only an issue if you have a large estate?
In California, probate court is required to transfer assets if your estate includes real property, or non-real property assets exceeding $150,000. Probate does NOT affect assets in a Living Trust, or those with proper beneficiary designations. If you own a home in California, you should use a Living Trust if you care about your heirs.

If you have beneficiaries designated on any assets, be sure to be extremely careful about naming the correct beneficiaries! For example, young or disabled children make poor beneficiaries, but a Living Trust set up for them makes a perfect beneficiary.

How often do I need to update my Living Trust?
Living Trusts are usually revocable, meaning you can change or update your Trust any time. If there are changes in your family or financial situation, it’s important to update your Trust so that your decisions are still valid. We have seen many documents appointing dead trustees, leaving money to former spouses, and that entirely omit grandchildren!

It is also critical to review your trust when there are changes in the law that affect your estate. For example, in the 1990’s the estate tax exemption was only $600,000, and now it is well over $5,000,000. The old 1990’s “AB” Trust format may no longer be appropriate for some families, and should be reviewed.

All complete Living Trusts should have an up-to-date asset schedule. Be sure to keep your asset schedule(s) up to date regularly. Even if you have no changes, we recommend a complete review of your estate plan every 5 years.

Do I really need to hire an attorney for my Living Trust?
It is not only critical to have an attorney set up your estate plan, but you should always use an experienced estate planning attorney. Your attorney needs to know how to ask the right questions, then draft custom documents to achieve your estate planning goals. In our experience, most non-attorneys and many attorneys who do not specialize in estate planning and trust law make significant errors when drafting estate planning documents.
The State Bar of California certifies specialists in estate planning, trust and probate law because it is one of the most complex areas of the law.

From the American Bar Association:
It is easy to be lured by advertisements claiming you can save time and money by drafting your own will or trust using do-it-yourself websites, retail software, or fill-in-the-blank will or trust kits from the bookstore. It is unlikely that these alternatives will generate a suitable plan that accomplishes all of your objectives. Only a qualified trusts and estates lawyer can interpret the myriad laws bearing on property rights, taxes, wills, probate, and trusts. More important, canned programs and forms cannot provide the wide range of legal advice to assure that the form is correct, that assets passing outside of your will or trust are properly handled, that state law nuances are taken into account, or that relevant tax, legal and personal issues are properly addressed.

How do I choose the right attorney?
Choosing the right attorney is critical – a poorly drafted Will or Trust can cause more problems and undue hardship to grieving family members. We recommend you get referrals from a friend, family member, or financial professional of an attorney who is both experienced in drafting documents, but also in successfully using their documents to administer estates after death. If you can’t get a qualified referral, then visit the California State Bar Website at CalBar.org to find a State Bar Certified Specialist: Estate Planning, Trust & Probate Law. Also, be sure to carefully read any online reviews.

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